Reid Hoffman: The network philosopher

Investor. Founder. Thinker. Connector. Reid Hoffman has been called the best-networked man in Silicon Valley. Now he wants to use all he’s learned to change the world (and your career) for the better

Jill Greenberg

This article was taken from the April 2012 issue of Wired
magazine. Be the first to read Wired's articles in print before
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He may be the
billionaire cofounder of LinkedIn, an early investor in Friendster
and Flickr, a board member of Zynga, Airbnb and Mozilla, and the
man Sean Parker approached back in 2004 to invest in a promising
new startup called thefacebook.com. He may also be the digital
world's best-connected networker, the man his VC colleague Aneel
Bhusri calls "the Kevin Bacon of Silicon Valley", who each day
receives 500 emails and 40 business pitches. But all Reid Hoffman
ever wanted to be was a philosopher.

"My original plan was to become an academic," the 44-year-old LinkedIn executive chairman and Greylock Partners investor
reflects over lunch one crisp November afternoon in a riverside
Cambridge hotel. "I won a Marshall scholarship to read philosophy
at Oxford, and what I most wanted to do was strengthen public
intellectual culture -- I'd write books and essays to help us
figure out who we wanted to be." Within months of starting his
course, however, Hoffman concluded that "spending one to two
decades answering a professional philosophical question" might not
impact sufficiently on the world. "I realised that academia wasn't
the right platform -- it didn't have enough scale," he says. "So I
decided I would be a software entrepreneur."

The switch has suited Hoffman just fine. LinkedIn, the
professional business network which launched in 2003, went public
last May at a $4.3 billion (£2.76bn) valuation, and within hours
the share price had more than doubled from $45 to $94.25 -- with
Hoffman and his wife, Michelle Yee, owning 21.4 per cent of the
company. Before that, he founded Socialnet.com, one of the earliest
social networks; was executive vice-president of PayPal when bought by eBay for $1.5 billion
in 2002; and then declined Parker's offer to lead Facebook's first funding round ("the
most expensive decision of my life"). Still, after he suggested
instead that PayPal cofounder Peter Thiel lead the $500,000 round,
he made a five-figure investment of his own ("I don't comment on my
percentage ownership"). He was also in the first round of
investments in Zynga, Digg, Shopkick, Friendster, Six Apart and Kongregate;
put the first Silicon Valley money into Flickr and Last.fm; and also bought into Groupon -- an
unusually consistent track record in a sector littered with
failures. "When presented with an investment that I think will
change the world in a really good way, if I can do it, I'll do it,"
he says.

Hoffman is in Cambridge today to further that mission,
co-chairing a packed four-day programme called Silicon Valley Comes
to the UK which temporarily imports talents such as Google's Megan
Smith and Thomas Ryan of Threadless to inspire
students and inform politicians. He has just completed a session on
gamification: LinkedIn's "profile completeness" bar, he reveals,
took an hour of coding but spurred a 20 per cent jump in profile
length. His next session will elaborate on why he sees data as Web
3.0 -- and why every business needs a "big data strategy". In
another panel, he'll explain why the potential of mobile may take
three years to be realised, and why "biology as code" will spur
extraordinary innovations. "The future," he says, "is sooner and
stranger than you think."

It's a rare break from his intense West Coast schedule, normally
split between LinkedIn's offices in Mountain View, California, and
Greylock's in Menlo Park. That is, when he's not advising
nonprofits such as Endeavor, Kiva and Questbridge; exploring
further investments in "marketplaces, networks or platforms", most
recently in education startup Edmodo; advising entrepreneurs such
as Groupon's Andrew Mason; and, at long last, publishing his own
245-page philosophical treatise.

The book, published in February, is called The Start-up of You,
and its overarching message is that "every individual is a small
business". Cowritten with Ben Casnocha, it urges readers in their
careers to "craft iterative, flexible plans… be in permanent beta…
build a network of relationships… budget time for randomness". It
cites as case studies the rise of Netflix and the fall of Detroit, the pivots of Flickr and
Intel, and the contrivance of George Clooney's acting career, with
a reading list that includes Nassim Taleb, Joshua Cooper Ramo and
Steven Johnson. The insights shared, naturally enough, rely heavily
on stories from Hoffman's professional and social network -- as
well as his own extraordinarily focused technology career.

His goal, he explains over lunch, is to encourage all of us to
"think about our lives as entrepreneurs, using this playbook as a
way five years from now to be in more control of my life, create
more value in myself and the world around me, by proactively
investing in growing my capabilities and adding more to society.
People sometimes think it's morally wrong to talk about investing
in themselves," he says, animated and engaged. "Absolutely wrong.
In a flatter world with more competition, how do you succeed? How
do you invest in yourself and gain those skills? You can't do it
accidentally."

It is a message straight out of the LinkedIn marketing pitch --
indeed, the hardback cover uses the site's familiar blue and white
logo. "Reid in some ways is a perfect embodiment of LinkedIn," says
Peter Thiel, who met him at Stanford University in 1987 when
Hoffman was studying symbolic systems. "One of the conversations I
remember having with him was what is the meaning of life. His
answer was it has something to do with the people you spend your
life with and the connections you make. That ethos has very much
informed Reid's thinking -- that there are questions about how to
connect people, how to create new types of community that are at
the core of what you need to do to make the world a better place.
Reid thought through the social networking part of the internet
revolution earlier and more methodically than anyone else."

Thiel describes LinkedIn as the stealth social network of the
Web 2.0 era. "It's not been as spectacular as Facebook, nor quite
as overnight as Groupon or Zynga or Twitter, and it's the least glamorous of
the five big new internet companies of the last decade. But it has
the clearest core value of helping people connect with people,
mainly to get jobs. It's probably in some sense the most underrated
because of that."

LinkedIn -- where Hoffman lists himself as an
"entrepreneur/product strategist/investor" -- may lack some other
networks' sex appeal or user engagement (TechCrunchonce called it "the boring social network that won't find you a
date but may land you a job"). However, being unsexy isn't the same
as being unpopular: it now has more than 135 million members,
according to Hoffman -- "and we're growing at over two members per
second".

Hoffman arrives for breakfast at the Four Seasons, Palo Alto, in
the same green Acura he bought when PayPal sold ten years ago.
Thiel at the time bought a Ferrari. "There's a Warren Buffett-like
element, whereby Reid is very good at making money and investing,
but is strangely indifferent to spending it," Thiel says. "He lives
in an average four-bedroom house in Palo Alto. It's an
upper-middle-class life."

Hoffman -- dressed noticeably casually for the hotel's Quattro
Restaurant, in Levi's jeans and a black T-shirt "bought by
Michelle" -- admits cheerily that he is finally thinking about
upgrading his ride to an Audi S7, though he won't have time to
test-drive it first. "The S7 would be the most extravagant purchase
I've made for myself," he reflects. "I bought a prepayment card for
Flexjets in case I need to
fly at short notice, but I didn't buy a plane."

Extravagance fails Hoffman's intrinsic-value test. "When we were
going public, I sold a tiny amount of [LinkedIn] stock, and the
Wall Street Journal reported that Hoffman's buying a
second yacht," he says rolling his eyes. "My response was, where's
my first?

"What makes the meaning of life is people, so you try to be good
to people immediately around you and in your broader community. So
a lot of my projects are about how I can affect the world in the
hundreds of millions. I only spend money when it helps one of these
vectors." His only acknowledged weaknesses: fine dining, and
electronic devices. "I'll buy a piece of computer equipment in a
heartbeat," he grins. "I also have five mobile phones."

So it's not money that's driving his big ambitions for LinkedIn.
"My belief and goal is that every professional in the world should
be on a service liked LinkedIn," he says over breakfast. "Because
all of the attributes that apply to a business now apply to an
individual, like business intelligence. If you can get better at
your job, you should be an active member of LinkedIn, because
LinkedIn should be connecting you to the information, insights and
people to be more effective." The only threat to the site's
continued growth would be a failure to innovate: a "fumble" that
allows a better adapted upstart to swoop in, as he remembers
Facebook doing to Friendster. "For example, Google's concern is not
that Facebook can simply just build a better search engine -- it's
that the social graph, and all that private information, are two
essential elements for the next generation of search engines that
Google won't have access to."

Ownership of that private information, he accepts, is a key
question facing social networks. "We take a co-owned perspective,"
he says. "We try as much as we can to give you the authentic
individual choice of what you want to do. So we allow people to
download their entire list of connections into a CSV file -- but we
don't allow a third-party service to scrape it on your behalf."

Why, then, doesn't he use his position to encourage Facebook to
allow users similar control? "I've never really talked to them
about this," he says after a moment. "So I can't really speculate
on what their real views are -- generally speaking, Zuck [Mark
Zuckerberg] tends to think the whole world is better when it's more
transparent. I don't know, I'll ask him and find out the
intellectual substance."

Still… as a philosopher, does he see any ethical concerns in a
private company controlling access to users' digital histories?
"Well, I think it's not unethical if the designer of these systems
is trying to design something that they think is for the better
society. Zuck is actually on a mission: it's not just, I want to
own it to be a monopolist -- he has a vision for a better society.
The question is, why is this configuration of ownership important
for that? I'll ask him. He's trying to move to a space that is
enhancing the social sharing of information and making sure
people's level of knowledge and connectivity with each other is
massively increased. If you don't want to participate, then don't
sign up." Besides, good behaviour is governed by commercial
realities. "If you do anything that is substantially evil, Google
would love to say, hey everyone, we're much better, come over here.
And once you're very large, governments can always turn and
regulate too. I would be flabbergasted if Facebook were ever to
say, you can't have access to your pictures unless you pay us. The
outcry would be so substantial that there would be House and Senate
inquiries the next day." He messages himself as a reminder to speak
to Zuckerberg about ownership of user data. "I know Zuck," he says,
"and I know he's trustworthy and has no nefarious intent."

Has he himself used Google Plus?
"I'm on it, I've played with it, but I'm not really that active
with it," he says. "I think there's a lot of credit to Google for
realising that social is very important." Cautiously, he adds: "One
concern most of the folks in the Valley have about Google Plus is
over how much they build social into search. It should be a
platform as opposed to a tied proposition. On the other hand, for
Google Plus to really get some steam it has to be substantially
unique from Facebook. I'm personally not of the strong belief that
Circles is that. It's interesting, it's an innovation, but for a
feature to be substantially differentiated, it has to be something
that 30 to 60 per cent of the user base would use actively. I don't
think Circles is that. The dynamics around social, I don't think
they have the full tool set yet."

His own dealings with Zuckerberg go back to 2004. "I'd tracked
the launch of Facebook as an interesting thing, and if Zuckerberg
had been in Silicon Valley [rather than Boston] I'd have gone to
find him. I had in the interim been building a relationship with
Sean Parker. Sean moved out of Plaxo, called me and said, 'I've got
this really hot company, it's Facebook. They've moved out here and
we're looking to put together an angel round -- would you be
interested in leading it?'"

Hoffman then made that expensive decision to decline, concerned
with potential conflicts of interest. "None of us knew how big
Facebook would get, but LinkedIn cared about college too. So I set
up a meeting with Peter, Zuck, Sean, Matt Cohler and me at Peter's
office in San Francisco. Zuck was very quiet. But we didn't just
talk about Facebook: we also talked about this other peer-to-peer
file-sharing thing he had called Wirehog. 'I've got these two
things,' he said. I said, 'You should focus on the Facebook thing.
This could potentially go somewhere.'"

Hoffman split his co-investment with long-term friend Mark
Pincus, later founder of Zynga. "It was substantially under
$100,000 each. I sold a little earlier [last] year, 30 per cent of
my position on the secondary market as I didn't want to sell any
LinkedIn stock." Thiel's $500,000 convertible loan bought him 10.2
per cent of the company, since diluted.

Does Hoffman now kick himself about passing up the opportunity?
"Not really," he says. "The only thing I kick myself for is, it
would be more fun to be on the board working with [Mark
Zuckerberg]."

And after Facebook's IPO? "There's a lot of growth prospect in the
company -- China, additional services that would add revenue. My
sense is they'll supplant [Google's] Orkut in Brazil. Mark learns
really fast. One of the conversations we have is, should we keep
Facebook as it is, or should we modify it thinking about the China
strategy. If we're blocked and we're not playing, are we doing less
good than if we modify it? The position that I advocated was
modifying it, as long as it's still in the vector of the
mission."

In a brutally competitive industry, Reid Hoffman's name triggers
unusually warm tributes from a stellar list of associates and
friends. "I haven't met a single person in more than 20 years in
Silicon Valley who's more generous with their contacts or time,
who's more willing to listen and learn and brainstorm, or who
genuinely wants everyone he meets to become as good an entrepreneur
as they can possibly be," John Lilly, Mozilla's former CEO
and now a Greylock partner, said when introducing him at an
Innovation Catalyst Award ceremony in December. Long-time friend
Joi Ito, now running MIT's Media Lab, says of Hoffman: "He looks at
the world as a huge game where he's trying to optimise for the
common good. I don't know many businessmen with his level of social
thinking." And Elon Musk, a former PayPal colleague and now CEO of
Tesla Motors and SpaceX, sees him as driven simply to "create
something truly useful to fellow human beings".